Preparing to purchase your very first home is not only an exciting experience as the entirety of the situation can be both overwhelming and daunting for most young professionals. Trying to make sense of credit scores and down payments is only the start. This informative guide will help you prepare for one of the most significant purchases of your life.
Determining your budget for a mortgage is a bit more tricky than creating a budget for your grocery items each month. Even though most first time buyers view the purchase as an investment, you should consider buying a home because you want to. This is because your primary residence should mainly be for you to live in rather than an attempt to flip your purchase and make money. It would be wise to buy a home that you can afford. As a first time buyer, you should make use of mortgage calculators to determine what you can afford. Rather than battling on your own, these calculators can provide in-depth insight as to what you could expect.
Your credit score
You may already be aware that you would need to have an impressive credit score to be approved for a mortgage loan. It would be worth your while to investigate your credit report for any errors and devote some time to daily credit score monitoring to ensure you will be approved. Improving your credit score may take up to six months, which may be a bit of a disappointing set back if this is the case. However, this time could be used to set aside more funds for your down payment.
Your down payment
As your down payment should be between 20% and 30% of the purchase price you should ensure you have sufficient funds available. In addition to this, you will also have other expenses to pay during the process. You may feel somewhat tempted to invest in the stock market in hopes of turning over a higher profit while saving for your home although considering the stock market is hugely volatile this may be a mistake you would later regret. It is worth noting that the larger your down payment, the less your monthly repayments would be.
While you are saving for your down payment and improving your credit score, you should take the time to get your documentation together. When you are preparing to put in an offer for a property, you should already have gathered all your bank statements and previous tax returns. Your proof of employment and proof of payments will also be required. It would be wise to get all your documentation together to prevent small setbacks during the process.
Pre-approval and comparing quotes
One of the biggest mistakes that first-time buyers can make is simply settling for the very first mortgage loan deal they find. It would be far wiser to compare quotes from various lenders to ensure you really are getting the best deal. Once you have found the best deal, you should then apply for pre-approval.